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Bad, good or great?
The education future is yours to own
Blog by Chris Richardson and Lachlan Smirl
Driven by more than a decade of volatility in economies, politics, and disruptive technologies, increased uncertainty has certainly shaken the confidence of leaders.
Fear of the future has seen a fall-off in business investment – the pace at which the world is putting its money into a better future. But we’ve overdone it. A closer look over the horizon suggests that even ‘bad’ futures aren’t nearly as bad (or demoralising) as you might think, and that there are a bunch of ‘good’ futures too.
To invest or not invest?
Business and political leaders are responding to current conditions by being cautious and sitting on their dollars. Investment in new capacity is a rather smaller share of the economies of the G7 nations than it was over a decade ago.
Even though the world’s leading economies got bigger in the last decade, the ‘future-focused’ spending undertaken by businesses has fallen as a share of those economies. And if businesses and governments aren’t taking reasonable risks – if they’re too cautious – then we all suffer.
Confidence is key
Future prosperity requires the decision-makers of today to be able to see their way cleary to making informed decisions. Deloitte does CFO surveys in some 40 nations, and in the last 18 months there has been a rising clamour from the business world. Our own work and that of others1 suggests executives are awash in a sea of uncertainty.
Our day job at Deloitte Access Economics includes spelling out detailed forecasts on what we see as the most likely outcomes – growth across different sectors and the Australian economy as a whole; as well as projected incomes, wages and prices, interest rates and exchange rates. But that ‘most likely’ view of the future is far from a done deal. That’s why, as the latest edition of our Building the Lucky Country series explores, we need to think about some ‘plausible outcomes’ as well as ‘the most likely outcome’.
Expectations of education
In this context, there’s a lot to like about higher education; especially international education. Yes, the introduction of the demand driven system has seen most of the latent demand that existed in the domestic market realised and, hence, enrolment growth return to a trajectory governed by growth in the underlying population. Over and above that:
- The increase in birth rates witnessed a decade or so ago will see more young people making their way through the schooling system and only years away from contemplating university life. At its peak (around 2030), this wave will see the number of Australians turning 18 each year jump from the roughly 300,000 observed today to almost 360,000. This will spur an uplift in higher education demand of around 20% from the local population.
- At the same time as demographic destiny within Australia boosts the demand for higher education here, global developments can be expected to do the same as key source markets in the Asia Pacific continue to grow rapidly.
- It also helps that the labour market continues to handsomely reward students for investments in their human capital.
- And that a combination of pull (trends within the economy) and push (from governments) means that the share of the younger population enrolling in education is rising in trend terms.
Internationally, the story is now well established. Australia continues to be a destination of choice for students looking for an overseas study experience, and Australia’s universities continue to be favourably viewed by students looking for an international qualification.
Analyses, including our own modelling, points to international education being among the fastest growing sectors globally over coming decades. Fuelled by income growth in emerging Asia and a fillip to growth from the fall in the AUD from its 2012 peak, the world’s demand for education is opening up huge opportunities for Australian higher education providers both at home and abroad (especially through digital delivery).
Education (and opportunity) are there for the taking
Our Horizon model and the scenarios we explore point, as you would expect, to a range of future fortunes for Australia’s higher education sector. Noting that all of these come against a backdrop of a sector that – globally – is outstripping the growth of most others, our modelling shows material downside potential under some of the ‘plausible outcomes’ we explore. A major housing crash, a widespread disease epidemic or a terrorist attack-fuelled immigration cutback are all capable of sharply slowing revenue growth. The upside, while real, is more modest. And in fact the greatest upside scenario is not a third wave of growth from Asia, but the loss of Australia’s AAA credit rating, which would trigger a lower AUD.
There is no doubt that higher education faces the horizon with wind in its sails. But, like all sectors, its future is characterised by degrees of uncertainty. In the face of this uncertainty, the success of individual institutions will hinge on their ability to plan and invest – mindful of the full spread of future possible outcomes and the ability to execute with pace, responsiveness and decisiveness.
1. For example, see the likes of https://www.stlouisfed.org/publications/regional-economist/april-2013/uncertainty-and-the-economy, http://www.nber.org/digest/nov10/w16143.html, and http://voxeu.org/article/unusual-outcomes-and-uncertain-times